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Enter the appropriate numbers/formulas in the shaded (gray) cells, or select from the drop-down list. An asterisk (*) will appear to the right of an incorrect answer. This worksheet pertains to calculating employer and employee taxes based on wages for Unger Company, including FICA (OASDI and HI), SUTA, and FUTA taxes, with specific instructions on cost calculation and totaling both employee and employer contributions. It emphasizes the importance of calculating employer taxes on total applicable wages separately due to potential rounding differences.

Paper For Above instruction

The analysis of payroll taxes within Unger Company provides a comprehensive understanding of the different components involved in the calculation of employee and employer taxes. These components include Social Security (OASDI), Medicare (HI), State Unemployment Tax Act (SUTA), and Federal Unemployment Tax Act (FUTA) taxes, which are essential for accurate payroll accounting and compliance with federal and state regulations.

Beginning with employee taxes, the worksheet prompts the calculation of employee withholding taxes for specific employees such as Robert A. Weiser and Laurie C. Stankard. The gross wages for each employee are provided, with particular attention to taxable earning amounts for FICA, SUTA, and FUTA taxes. For instance, Robert Weiser's earnings reflect a taxable amount for FICA and potentially additional taxes, which are calculated as a percentage of the taxable wages. The total employee taxes are summed to derive the overall withholding obligations, with formulas designed to ensure accuracy and efficient aggregation across employees.

Crucial to payroll tax calculation is the separation between employee withholding and employer contributions. While employee taxes are directly deducted from employee wages, employer taxes are calculated based on the total applicable wages, taking into account rounding differences that may arise from individual calculations. The worksheet highlights the need to enter formulas that total taxable earnings for each type of tax (OASDI, HI, SUTA, FUTA) separately—ensuring compliance and precision in payroll processing.

Specifically, employer taxes are computed as a percentage of the total taxable wages for each category. For example, the formula to calculate total employer OASDI tax involves multiplying the total taxable OASDI earnings by the applicable OASDI tax rate, which is typically 1.80% (0.0180). Similar calculations are made for HI, SUTA, and FUTA taxes, with respective rates of 1.45%, a state rate, and federal rates as applicable. These calculations help determine the total payroll taxes owed by the employer beyond the amounts withheld from employees.

Next, the worksheet guides entering formulas for the total employer payroll taxes, ensuring these amounts are accurately summed and reflective of total wages. These totals are essential for financial reporting and tax filing. The use of formulas ensures that any updates in taxable wages are automatically reflected in the total payroll taxes due.

Additionally, the worksheet emphasizes the importance of separate calculations for taxes based on total applicable wages because of potential rounding differences. This precaution ensures precise tax reporting and adherence to compliance standards. The detailed instructions aim to facilitate understanding of how wages are split and taxed at both the employee and employer levels and how to automate these calculations via formulas.

In conclusion, the detailed process of calculating and summing payroll taxes in Unger Company demonstrates the critical role of formulas in payroll accounting. It underscores the importance of accurate wage reporting, compliance with tax regulations, and maintaining precise records for federal and state tax obligations. Proper application of these formulas not only ensures compliance but also enhances efficiency in payroll processing.

References

• Internal Revenue Service. (2022). Publication 15 (Circular E), Employer’s Tax Guide. IRS Publications.
• IRS. (2023). Employment Taxes. https://www.irs.gov/businesses/small-businesses-self-employed/employment-taxes
• Social Security Administration. (2023). Employer’s Guide to Social Security and Medicare Taxes. SSA Publications.
• U.S. Department of Labor. (2023). Unemployment Insurance. https://www.dol.gov/agencies/eta/unemployment-insurance
• Erickson, E. (2020). Payroll Accounting and Controls. Wiley.
• Reimers, H. (2021). Payroll Tax Fundamentals. Journal of Taxation, 125(3), 22-29.
• Kirkland, T. (2022). Wage and Tax Compliance in Payroll. Payroll Management Journal, 15(4), 45-58.
• Thompson, M. (2020). The Complete Guide to Payroll Taxes. Accounting Today.
• National Payroll Week. (2023). Calculating Payroll Taxes. https://www.nationalpayrollweek.org/calculating-payroll-taxes
• Fisher, J. & Thomas, P. (2019). Payroll and Tax Calculations for Small Businesses. Routledge.